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Hal Bundrick, CFP® · Senior Writer Updated Tue, November 25, 2025 at 12:18 AM GMT+8 10 min read Changes are slowly filtering through the U.S. housing market. Mortgage rates are approximately a half-point lower than they were this time last year. Home values are decreasing in certain areas, and even though the government shutdown has ended, it has left lasting impacts on housing, resulting in slower closing times. Considering all of the factors that exist right now in the 2025 housing market — is it a good time to buy a house?
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MORE: See our top picks for mortgage lenders for low or no down payments.
Understanding the 2025 housing market
Good news for anyone who wants to buy a house before the end of 2025: There are positive signs of improvement. According to the Realtor.com October 2025 Housing Market Trends Report, there are indications that the real estate market has become more balanced since 2024.
Active listings
More homes are on the market. The supply of houses for sale has grown for 24 straight months — exceeding 1 million active listings for six consecutive months.
Price reductions
In October, over 20% of listings featured price reductions. The Northeast was the region with the fewest price cuts, likely caused by fewer new construction opportunities.
Time on the market
The median number of days homes were on the market rose to 63 days in October. That's five days longer than this time last year and one more day than in September.
The longer listings remain active, the more choice buyers have. The increased time on the market is likely triggering those seller discounts we mentioned above too.
Mortgage rates
According to Freddie Mac, the highest rate over the same period has been 7.04%. They’ve been hovering in the low-to-mid-6% range lately, and the average 30-year fixed rate is currently 6.26%%. While that may still feel high compared to 2020 and 2021 rates, at least interest rates are currently staying well below 7%.
The Federal Reserve cut the federal funds rate again at its Oct. 29 meeting — but if history is any indication, this move probably won’t push home loan rates down. However, mortgage rates could decrease if factors surrounding tariffs and politics lead to a lower 10-year Treasury yield. Mortgage rates tend to follow the 10-year yield more closely than the fed funds rate.
To navigate today's mortgage rates, consider:
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More than half of home loan borrowers (56%) only get a preapproval from one lender. That reduces your bargaining power and limits the opportunity to find a better interest rate from a more business-hungry lender. Zillow research says that 45% of first-time home buyers who shopped with multiple mortgage lenders got a better rate.
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Putting down a larger down payment can earn you a better mortgage rate.
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Some buyers get below-market mortgage rates by negotiating a buydown or special financing from a seller or builder.
Take action: Use a mortgage calculator to determine the monthly payment you can afford. You can then learn the home price, down payment, credit score, type of home loan, and mortgage interest rate to meet your home-buying goal.
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Learn how to get the lowest mortgage rates.
Home inventory
New home construction has grown, with 1.63 million homes added to the inventory in 2024. Even so, the U.S. housing shortage is at an all-time high of 4.7 million units, according to Zillow's analysis of Census data.
"The unfortunate fact is that we still don't have enough housing in this country for people who need it. Construction has helped prevent the housing deficit from ballooning, but it hasn't yet begun to close the gap," Orphe Divounguy, senior economist at Zillow, said in a release.
Take action: If the area you love is too expensive, consider expanding your search to more affordable areas near your favorite neighborhood.
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How much house can I afford? Use the Yahoo Finance affordability calculator.
New home sales
According to the U.S. Census Bureau, new home sales increased by 4% in August compared to the same period a year ago. However, month-over-month sales were down by 1.4%.
Realtor.com expects 1.1 million new homes to be built this year. That's nearly a 14% increase over 2024 — with builders focusing on smaller, more affordable houses.
Take action: If you want to buy a house now, consider buying a new construction home. You may be able to choose from some finishes or negotiate a better deal on a spec home that has been on the market for a while.
Closing times
Yes, the government shutdown has ended. However, it’s going to take some time for the housing market to recover. During the shutdown, the FHA and VA were operating with smaller staffs than usual, which often slowed down the time between applying for a mortgage and closing on the house. USDA loans weren’t being processed at all. Now, these departments need to catch up on applications.
Take action: Unlike government home loans, conventional loans didn’t face many issues during the shutdown. If you qualify for a conventional loan with favorable terms, applying for this type of mortgage could result in the smoothest process.
Is it a good time to buy a house?
To answer the question of whether it's a good time to buy a house for you personally, you must look beyond broad market forces. Buying a home is more than considering macroeconomic factors. It's an important life decision based on your personal and financial situation.
Where do you want to be in 5 years?
When you rent, the decision to move is broken down into six months, or a year or two at a time, as your lease renews. But every dollar-related detail makes a home purchase a medium- to long-term investment. Buying a house includes various costs: the down payment, closing costs, and financing fees, moving expenses, property taxes, and perhaps selling the house you're in now.
Homeownership requires a long timeline. How you make a living, your friends, family, and even community amenities all come into play.
Your income
A primary consideration: your job. Will it require a location change anytime soon, or can you live where you please? Is your income steady and all but assured?
Your credit score
One of the significant factors that will qualify you for a home loan is your credit score. It's important to know it before applying for a mortgage.
For the most common loan, a conventional mortgage not backed by a government agency, you generally need a FICO Score of 620 or better.
FHA loans can allow a credit score as low as 580 with 3.5% down. VA loans issued to qualified military service members and veterans don't officially have a minimum credit score, though some lenders will require a FICO Score of 620.
Of course, minimum credit scores are the entry-level to qualifying; the higher your score, the better the loan terms you'll be offered. Most importantly, that can mean you'll pay a lower annual percentage rate over the life of the loan. You may also have more room to negotiate on fees.
As a benchmark to where you stand, the median credit score on a new mortgage in the second quarter of 2024 was 772, according to the New York Federal Reserve.
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See the average mortgage rate by credit score.
Your current debt load
A primary financial metric lenders will use to determine your creditworthiness is your debt-to-income ratio.
Fannie Mae, a government-sponsored entity that provides liquidity to the home loan market, looks for a maximum total DTI ratio of 36% of "the borrower’s stable monthly income." Exceptions can allow for total DTIs up to 50%, but it's usually best to avoid working on the edges of qualification if you can.
You can calculate your DTI by dividing your total recurring monthly debt by your gross (before taxes and other deductions) monthly income.
Include debt such as monthly mortgage payments (or rent), real estate taxes, and homeowners insurance. Also, include any car payments, student loans, and the minimum monthly payment due on credit cards. Remember any personal loan payments, child support, or alimony.
Do not include debt such as monthly utilities — like electricity, water, garbage, or gas bills — or car insurance, television streaming subscriptions, or cell phone bills. You can also exclude health insurance costs and miscellaneous expenses such as groceries or entertainment.
Your savings
Having a cash cushion in the form of emergency savings shows lenders that you are prepared for the unexpected. Of course, that savings account should also include …
Your down payment
A large chunk of your savings account should be dedicated to the down payment. A minimum down payment of 3% is required to qualify for a conventional loan targeted at first-time home buyers — or ideally, 20% to avoid private mortgage insurance. Yes, zero-down options exist if you are eligible for a VA- or USDA-backed loan.
According to Realtor.com, the median down payment in the fourth quarter of 2024 was 14.4%.
Up Next
Your next move
Buy smart and shop a lot. Relentlessly shop interest rates and mortgage lenders for the best loan offers and justified fees. Get a written preapproval from your lender, then shop for a house you can love and can afford. Your home buying competition is.
According to Zillow, when it comes to first-time buyers versus repeat buyers, first-timers are more likely to reach out to at least three lenders and three real estate agents.
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MORE: Learn about the best mortgage lenders for first-time home buyers.
Is it a good time to buy a house? FAQs
Should I wait for a recession to buy a house?
Mortgage rates tend to fall during economic downturns, so a recession would definitely qualify as a time when rates would likely drop. However, lower rates generally increase demand as more buyers enter the market, so house prices would likely rise. Buying a house at a time when both mortgage rates and home prices are favorable is a challenge. You probably shouldn’t try to time the housing market by waiting for a recession. Buy when it makes sense for you personally.
Should I buy a house before rates drop?
"Buy now" advocates might argue that if you find the right house at the right price — and you're financially stable — you should purchase the home now and consider refinancing later. But what if mortgage rates don't drop substantially enough to justify a refinance in a few years? Only buy a house when you are comfortable with the terms you can get on closing day.
Is it smart to buy a house right now?
There are pros and cons to buying in today's housing market. For example, inventory is improving, but the aftermath of the government shutdown continues to contribute to delays in closing FHA and VA loans. Deciding whether it's a "smart" time to buy a house is less about timing the real estate market and more about evaluating your financial situation. Can you comfortably afford the down payment, closing costs, and monthly mortgage payment? Do you expect to stay in the home long enough to recoup the money you pay up front? Then it could be a smart time for you to buy a home.
Is now a good time to lock in a mortgage rate?
Locking in a mortgage rate is a short-term decision, generally lasting only 30 to 60 days — sometimes up to six months. There's little reason to agonize over it. Be comfortable with the rate on your Loan Estimate and start packing boxes.
Will U.S. housing ever be affordable again?
Homes become more affordable as your income and savings grow. Ask any homeowner: Buying that first house was a stretch. The monthly payment loomed large. As months and years go by, it becomes less of an issue. Then, as home prices continue to rise, you're on the right side of the equation: The growing home equity builds your net worth.
Laura Grace Tarpley edited this article.
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